Most people that are looking for long-term investments in real estate consider one form or another of having a long-term tenant.
This is generally something like a single family home, a duplex, or a multi-unit apartment complex.
This is common because for the last few decades this is how many people built their wealth.
But now we have airBnB, vrbo, homeaway, and other companies that are all about short-term rental models…
…which means we have alternatives to having long-term tenants.
Short-Term Rentals Are Like Time Shares
You own a condo in a location that you only visit every so often, but you don’t want to keep paying the mortgage while you only use it for only one week every two months.
This was exactly the situation I was in with my apartment back in my home town.
I wanted to use my condo every time I visited my family, but I didn’t want to keep paying a mortgage while it was empty, and I did not have a great time with my long-term tenants.
My condo also happened to be right outside the gates of the local college that was huge with football and tailgating.
This meant that, at least during football season, my condo would be in high demand two weekends per month.
It otherwise was close to downtown and right next to campus, so there were other events that people would want to be close to.
With a $562 mortgage and $288 HOA fee, along with electricity and other utilities / requirements, I was sitting at around $1100 per month in expenses for this condo.
With an average of $100 for a night’s rent, it would only need to rent out for 11 days out of the month to be completely free!
With game weekends and special events, the nightly rate would be around the $130 range, which is just an added bonus.
Now, I get almost 20 days per month to use for whatever I want while not having to pay for anything at all.
Now imagine taking this model…
…and multiplying it.
Own Multiple Vacation Homes For Free!
So if we take this model and multiply it, what do we get?
Imagine having a home in Hawaii and in San Francisco that rents out 1/3 of the month.
You can visit these cities and stay in these locations for free (literally), so you’re really just paying your flight and travel costs.
When I go on a trip, it’s often the lodging that is the most expensive thing about it.
Now, when I know I’m going to be visiting a place either for business or because I like it, I know that it’s a target for a short-term rental property that I can then book for myself when I want to visit.
Now, the key to getting these types of properties is finding the ones that are going to be hot spots.
You don’t want to get just any old house that’s in the middle of nowhere.
It needs to be near something that a particular audience would want.
This could be a property near a resort, beach, tourist point of interest, cabins, downtown, or business district.
Yes, business people will rent airBnB locations as well.
You can even get a place near a venue for shows or conferences.
There are many different styles of rental properties that you can go for, you just need to know what the audience will be and why they are there.
There are a few different websites out there that can help you see and determine what current airBnB listings are doing, what they offer, and what they go for.. along with their vacancy rate.
There Is More Than One Way To Have A Short-Term Rental Property
You don’t have to just get single-family homes.
I frequently visit California for business trips, and there are 3 different styles of these rental properties:
- Single family homes – just like the ones I’ve talked about above.
- Multi-unit homes – Big houses that have several bedrooms. It’s a shared rental space, meaning that each room has a different booking schedule.
- Shared Rental – Big houses that are rented to one group of people. This is especially common near beaches where a group of people will go for an after-party or for something like spring break.
Depending on the area, all of these models can work and can provide a property that turns into a cash cow.
Up above, I described a property where I can basically own it for free.
But when you have a multiple property short-term rental model, you can generate 3-5x your costs in profit.
You might be paying $1000 for the mortgage per month but generating about $3000-$4000 revenue, of course depending on vacancy rate and demand.
This model allows you to adjust your prices and schedule as needed – something you can’t do with long-term tenants.
Some of these properties can even be project homes.
Meaning, if you have the funds, you can get them at a discount by doing a short sale or buying at foreclosure.
Many people like to sell homes quickly and at a discount if they’re foreclosed, need to sell the house from a divorce, or they’ve even inherited it.
Specifically, divorces are a huge cause for selling houses quickly.
This means you can buy the property, put some work into it, and turn it into something that generates cash flow quickly without market-value costs!
It’s Not Necessarily New
This model isn’t exactly new, since airBnB has been around for a while.
But more and more people in the real estate world are starting to catch on, which means that there are many homes being converted into this.
New Orleans, for example, has a huge airBnB inventory.
But there are HOAs beginning to set up rules against it in order to block that.
For some gated communities, they don’t want to have strangers coming in and out, as that can be a security risk.
While that’s understandable, it can also be pretty paranoid.
The important thing is to keep track of what the rules and regulations are for each complex.
Make sure you check that out before you buy a unit in a shared community.
In most cases, it’s best to get a home that doesn’t share walls with another unit or building.
Check out this model, and drop a comment to let me know what you think.
Don’t forget to check back and see updates on some more about the rental model and general real estate tricks (https://vacationrealestatehousing.wordpress.com)!